Each of us have our own perspective when it comes to timing the Markets! If you look at where the India Stock Markets are right now, some would say the conditions are ripe for a much further move up; while some others would say the valuations are over-stretched and it is better to book profits. Well, to be frank, nobody knows what would happen tomorrow. Our guesses are as good as the toss of a coin!So, where does that leave us?
My experience investing in over a decade says invest regularly. That way you won’t feel left out if the stocks move up; if they go down, your further investments would average out the ones you’ve already made. However, basic common sense would say a developing market like India should pay off in the long term, and that’s what it has done! Nifty50 – a widely tracked index of the Indian Markets – has a CAGR of 11.7% in last 20 years (since 1996) and 7.5% in last 10 years (since 2006). But one has to keep in mind that these are long-term averages, meaning there were ups-and-downs over these years. To put things into perspective, if you had invested a lump-sum amount just before the crash of 2008, your money would have taken a serious beating; but, if you had invested at the peak of the crash, you would have made a killing in the next few years. That’s why the wisdom says invest over time.
One basic mistake is to blindly go by the commentary of Analysts. Many have been advising since long that we are in the over-bough territory. If I had followed their advice, I would have not made record profits in each of the last few months! Though it might sound concerning, most of those profits have come from stocks that already rose a bit and my gut feeling asked me to still go with them. Having said that, I do maintain a balance between investing directly in stocks and also in mutual funds via sip route…the individual stocks might get hammered during tough times, but a basket of them would be relatively better off. It is essentially risk vs reward playoff.
This leaves us with using our best judgment when it comes to investing. If you have a long enough experience in the markets, the call will be relatively easy to make; but if you are a novice, you might burn your fingers initially. Again, that’s where investing regularly over a period of time helps and you learn in the process too!